Is it possible to learn how to successfully trade on Betfair (and Betdaq) markets in the long-term? Why do only 5% (or less) of traders manage this? Is the correct mind-set the most important factor leading to success?

Should Sports Exchange Traders get a "real" job?

When I get asked, “what do you do?”, I don’t tend to say, “oh I place an average annual salary on every horse race throughout the day. I don’t even glance at the form beforehand. But it’s really not like gambling”. I tend to mention my part-time businesses or what I used to do.

When I have mentioned sports exchanges in reply to this oft-asked ice-breaker, I have almost succeeded on occasion to keep the conversation the right side of respectable, but then as soon as I have to mention the word “horses” I can feel a cavern opening beneath my feet taking me back to burn in hell where I belong!

I have felt this unease from many people and at times from myself. Why is this?

I think at its simplest, any link with betting on horses has a very negative connotation for the majority of people. When I explained in detail what trading on horses is about to a friend, she pointed out that her father lost a fortune betting on the horses and I suppose this indirect negative experience of gambling is typical.

When I started dabbling with Betfair trading in 2005 I believed the sales blurb from the software maker that it wasn’t gambling. Now I am sure that it is gambling. But I do believe that trading is a subset of gambling that probably has a higher likelihood of success (albeit still very small).

When betting, you only need to produce your stake for the next bet, whilst when trading, you are intentionally using far larger amounts of money than you intend to risk. The problem is that if it goes badly wrong, then a form of Parkinson’s Law can rear its ugly head – Losses expand to fill the size of the bank available! Looking at the path I’ve taken in the past 5 years – and losses along the way – surely does mean that trading is gambling and the losses can be horrendous. Just look at how many blogs spring up from traders only to disappear in total bank loss within months or less.

Furthermore, Betfair stated last July that for the financial year 08/09, "Betfair paid £6.16m of the reported £6.2m paid by “exchanges”. We also paid more than 90% of the £1.35m which has been reported as “voluntary levy from offshore operators”. This payment was paid at the full levy rate – 10% of gross profits.

Our total contribution to the Levy in the period is therefore approximately £7.5m, up 7% from last year.

............Betfair would like to thank its customers for their continued support which enables us to make significant contributions to British racing."

Football doesn’t seem to have the widespread negative connotations about gambling (although I think the same or more may now be gambled on it than horseracing on Betfair). Betfair’s M.D., Mark Davies, states on his blog, “80% of Betfair's revenue came from UK horseracing eight years ago, and less than 25% does today”.

Here's something I've been mulling over for some time. What is gambling? Just betting? What about hedge-funds, Forex traders et al? Is that socially acceptable gambling ? It is after all, gambling. British taxpayers are all the owners of several banks to prove what goes wrong when their bets lose. What do those traders do that is so superior? Why are they "Masters of the Universe" and horseracing traders are something to be frowned on?

What about the millions of people following a traditional career path who "invest" chunks of their life-savings in shares? My opinion is that they’re gamblers too. In some ways that is quite reckless as it is not their full-time job to research companies properly, albeit that as the stock-market goes up over time then with a portfolio you should be on a winner eventually. But if getting a steady return is the objective then why not stick savings in the bank or government bonds etc? Because, I think, it's a gamble to make more.

19 comments:

Great blog post - As you say trading gambling, just a variant on the traditional form of gambling. People are gambling all the time, for example with their time that it is best spent going down one career path to another. Also any one investing in shares is gambling it is just that that form of gambling is socially acceptable.

Anyone who tries to pretend trading is not gambling is wrong as although we are not gambling on the outcome of the event upon which we trade if pre race traders we are however gambling up on the direction of the price movement.

Hey Leon, thanks for the comment, it is good to hear fom you. I have learnt some very useful stuff from your blog in the past. I tried to contact you shortly after you stopped, maybe you could email me? Hope all is well. Cheers, MG

That's a subject I think about many times. If I trade the horses at Betfair, I'm a gambler. If I trade the EUR/USD I'm an investor. But in the end, It's all about graphs, patterns, buying and selling.Open a demo account in a Forex broker, learn some stuff about Forex, and start telling people you are a Forex Investor :P

Hello !!! You have very nice visual and interesting blog. I have the big request for you, whether you could add my blog to the list of your blogs, I already added your blog on my list, my address: http://tradingnawyscigachkonnych.blogspot.com/My blog is in polish, but I have translator google to translate it other languages.Thanks in advance, Many many regards and I wish very successes in trading !!!

I decided not to talk about my trading activities any more. Most of my time I invest into improving my auto-trading software system. That's what I tell to others: I work as a software developer. And since I do some contract work for a few customers, this works very well for me. No one knows about my trading activities, because my experience is people have a very negative attitude towards gambling... they look at you like a criminal or addict :-(

Hi Anon, Thanks for your comment, that is interesting and if I was auto-trading I'd say the same as you!Hi Bingo, I know what you mean, it's tempting to ditch the job and go it alone perhaps earlier than prudent!

Great post, I know where you are coming from. I see it from both sides, I am trying to learn to trade but have a history of losing lots of cash with "traditional" punting. In my case I can easily see why uninformed people only see the negatives when horses are mentioned. There's a hell of a lot of damage done by backing horses. Trading IS different, guys who know I had (have ?) an issue with gambling now ask me do I still bet. I tried to explain the concept of trading to them, but I can immediately see them saying "aha, he's still gambling, poor deluded sod". I know trading is a form of gambling but now I just say no if asked. My trading journey is just beginning and already very rocky (http://plaw999.blogspot.com/) and I am struggling with the discipline involved.

@Alexander. No thanks, I don't want my posts reproduced on other blogs.

@Average guy. Thanks very much for your comment. I will definitely check out your blog soon. I am very much of the opinion that trading Betfair is only a part time activity and that I need to do other work additionally for other reasons, such as fulfilment and furthering my experience so I am enriching my lifestyle in ways other than purely money. All the best with your trading journey! MG

What kind of posts would you like to see more of on here?

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About Me

I've been trading the horse racing markets on Betfair since 2005 and started betting on Betfair in 2001. I come from a gambling background and was fascinated when I first learnt about trading. It has been a long journey and I am finally getting consistent results although the markets are always evolving and my interests changing. I’d like to hear from other traders old and new and see if we can help each other and enjoy our trading more at the same time. You can leave comments anonymously or with your name, or email me. Cheers! Mind Games